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Apple is making more money than ever from Itunes
TOYMAKER FOR THE WELL HEELED Apple is making a packet from its Itunes store and its margins are increasing.
Figures from the analyst outfit Asymco show that Apple's margins on both music and applications sold at its Itunes App Store are growing at an impressive pace. Although Asymco's figures don't take into account the cost of running Itunes, which undoubtedly is considerable, it does show that Apple's Itunes App Store formula is paying dividends for the firm.
Asymco claims that Apple is making around $113m every month from flogging applications and music on Itunes. Those figures take into account everything Apple gets to keep after paying content owners, however it doesn't include hosting costs. The important aspect of Asymco's figures is that Apple's gross margin is growing, with Asymco's figures suggesting a $40m-plus increase in monthly takings over the past 12 months.
It's not surprising to see Apple making more money than ever from shifting applications. After all it gets a nice 30 per cent cut and doesn't have to deal with record companies, record labels and the associated hangers-on that suck money away from recording artists. The range of application prices is growing with high-value, business oriented applications available on the App Store for a lot more than just 99p.
However Asymco analyst Horace Dediu mentions that it is likely much of the money Apple makes through Itunes and the App Store has been reinvested to build up its datacenter and IP transit infrastructure. Dediu seems to think that Apple ploughs all of the cash it makes from selling applications and music back into running Itunes, claiming that it costs Apple $1.3bn a year to run the system
There is no doubt that flogging software over the internet is a costly business, but it would be naive to think that Apple, or any company, would bother running its own store at simply break even. Even if Itunes acts as a major selling point for IOS devices such as the Iphone and Ipad, a $1.3bn a year bill for hosting is a bit over the top, even if the racks are adorned with Apple logos.
Regardless of just how much Apple spends on keeping Itunes running, Asymco's figures show that increasing margins mean it's a worthwhile endeavor. µ
Tags: Apple
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In the early days, when Itunes was just a music store, I remember seeing figures claiming that Apple’s margins were peanuts, the majority of the cash going to the record companies.
If Apple is actually making a tidy profit on reselling Big Content, I think we can expect the RIAA & MPAA to step in and demand bigger margins. They don’t consider it permissible for anybody else to make money off “their” content.
Is their that many people whom are not aware of other choices when downloading music.
"it would be naive to think that Apple, or any company, would bother running its own store at simply break even."
Just like it would be naive to think any company would just give it's software away? (like Google does)
The job of the iTunes store is to attract potential buyers of i devices, which is where Apple make there money. Break even is fine in those circumstances.